Chapter 25, Problem 1STQ

To determine

Find the component which is not part of the components of the DuPont system for measuring and evaluating business performance.

Answer to Problem 1STQ

b. Residual income

e. Number of patents

Explanation of Solution

DuPont system for performance measurement: it is a method to evaluate the company performance by considering both the earnings per sales dollar and the investment used to earn those dollars.

$\text{Return on investment}\text{=}\text{Return on sales}\text{×}\text{Capital turnover}$

Following are the components of the DuPont system for performance measurement:

• Return on sales
• Return on investment
• Capital turnover

The above explanation is not matching with the options (b) and (e). Hence, options (b) residual income and (e) number of patents are the suitable answers.